The talking heads are all aflutter with the latest bout of economic news. For a couple of months now several prominent personalities have repeatedly proclaimed the “recession” to be over and that America is well on its way back to prosperity. How they could make such claims while looking at the same data the rest of us see defies both logic and common sense. The problem with the talking heads is that they have now committed themselves to their predictions of recovery while, in fact, we are very far away from seeing any such thing realistically materialize. They are focusing on individual bits of data that seem encouraging and positive, while ignoring warning signs and negative information. They are simply not looking at the bigger economic picture.
While they praise the perceived beneficial effects of the $787 billion stimulus package (less than 20% of which has been spent thus far) for bringing the economy back from the brink of total collapse, they conveniently ignore the fact that this so-called stimulus is only a massive “credit injection” that has been created literally out of thin air, is based on and backed by nothing, and can therefore ultimately produce nothing. It is entirely fictitious. And, while certain trends may indicate an improvement in economic conditions in the near term, what is certain is that any long term prospects for a real healing of this economic hemorrhaging are equally fictitious for as long as the "recovery" is dependent upon credit created out of thin air, based on nothing, and with no value.
Indeed, essentially every step taken by Congress, the administration (current and previous), the traditional media, and, sadly, many respected economists, to identify, assess and combat this growing financial crisis has also been based in fiction. The very fact that these same people who created the conditions that encouraged and enabled the behaviors that resulted in this crisis is alarming enough. Their elation over the latest housing numbers merely demonstrates the latest stage of denial and their almost universal ignorance of logic and good economic sense.
While celebrating the latest housing sales numbers, up 9.4%, and proclaiming this as the latest indicator that the “recession” is all but over, the talking heads seem to have forgotten about the commercial real estate market that is about to implode and drag many more financial institutions with it, as well as the flash-in-the-pan that was “cash for clunkers.”
One will recall how car sales spiked just prior to the end of the “cash for clunkers” program as consumers rushed to dealerships to get a last minute discount. Is it not as amazing as it is alarming that so many of those prominent figures who drive economic policy both in government and in the media either fail to see or simply choose not to admit publicly that those sales numbers, just like the current housing sales numbers, are simply fictitious and have no basis in reality? How can it be that so many seemingly intelligent people can look at a singular positive surge in sales, knowing that it is a totally isolated sample not at all representative of the sector as a whole, much less of the whole economy, and knowing that it is very much temporary because it’s cause is a single government intervention that began and ended at specific times? How can these people fail to make this connection when all of this data is staring them in the face?
Indeed, extending a one-time tax credit to new homebuyers will certainly boost sales over the period of time that the program is in effect, and the current numbers support this. However, what these shortsighted celebrants of a perceived economic recovery are missing is the fact that most of these homes were purchased through loans, while the economic output, or production, of the private sector is still declining, and unemployment is still increasing. Foreclosures are also still on the increase. The bottom line is that a single tax credit of any amount will do no good if one loses their source of income with which they intend to repay the loan obtained to purchase the home. It doesn’t help matters that the loans themselves are created out of thin air originating with the Fed creating an account on itself with which it “deposits” an amount for banks to pyramid atop at a ratio of ten “dollars” to every “dollar” held in reserve with the Fed. This is simply piling more debt atop already existing debt and is one of the major reasons for the current economic crisis.
Now consider the announcement today by FL Senator Bill Nelson that the housing tax credit will be extended at least through the first of next year. This is yet one more move by the government intended to help in the short term, but destined to hurt in the long term. Surely many of those who will take advantage of this tax credit will be in a sound financial position to be able to afford the purchase of a home. Others, however, will not be in such a sound position, and with the banks being coerced by a government that is also a substantial shareholder to “ease credit” and loan more money to anyone who can “qualify,” the Fed creating and pumping more money into the banks while buying up debt, and unemployment on the rise, the future results are all too predictable.
In trying to perpetuate a “recovery” of the housing sector to demonstrate the health of the economy and the longed for systemic “recovery,” more government intervention will only make bad become worse. All of their solutions thus far, from bailouts to stimulus, to phony tax credits and easy money and monetizing debt can be distilled into this: encapsulating a bursting bubble economy inside of a flimsy balloon as the bubble is bursting; and, following up by pumping more hot air into that balloon than it can possibly hold without bursting itself at some point. No one knows for sure when that point of bursting will come, but it will come because the laws of economics demand it.
With the market screaming for liquidation for well over a year now, we must ask ourselves these questions: how long can we continue to artificially prop up a rotten housing market, an insolvent banking system, a near worthless dollar and an economy that needs to heal itself? How much longer can we short-circuit the market’s natural tendency to correct itself and merely prolong and worsen the impact of the inevitable and drastic correction? How much longer can we allow a corrupt political class and an ill-begotten central bank to deny the truth about the economy and their disastrous monetary policies that have brought us to this point, doing great harm to our economy and our liberty? These are questions that cannot be ignored any longer.
More Info: Economics Abuse of Power Political Corruption
Comments
Well, the experts predicted that home sales would go up, but when the numbers came in . . . they still went down. So much for their expertise.
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